Correlation Between Home Depot and Niagara Mohawk
Can any of the company-specific risk be diversified away by investing in both Home Depot and Niagara Mohawk at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Home Depot and Niagara Mohawk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Niagara Mohawk Power, you can compare the effects of market volatilities on Home Depot and Niagara Mohawk and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Home Depot with a short position of Niagara Mohawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Niagara Mohawk.
Diversification Opportunities for Home Depot and Niagara Mohawk
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Niagara is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power and Home Depot is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Home Depot are associated (or correlated) with Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Home Depot i.e., Home Depot and Niagara Mohawk go up and down completely randomly.
Pair Corralation between Home Depot and Niagara Mohawk
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.54 times more return on investment than Niagara Mohawk. However, Home Depot is 1.85 times less risky than Niagara Mohawk. It trades about 0.06 of its potential returns per unit of risk. Niagara Mohawk Power is currently generating about 0.01 per unit of risk. If you would invest 30,778 in Home Depot on August 29, 2024 and sell it today you would earn a total of 11,941 from holding Home Depot or generate 38.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Niagara Mohawk Power
Performance |
| Timeline |
| Home Depot |
| Niagara Mohawk Power |
Home Depot and Niagara Mohawk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Niagara Mohawk
The main advantage of trading using opposite Home Depot and Niagara Mohawk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Niagara Mohawk can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Niagara Mohawk will offset losses from the drop in Niagara Mohawk's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| Niagara Mohawk vs. Mangazeya Mining | Niagara Mohawk vs. FitLife Brands, Common | Niagara Mohawk vs. Ultra Clean Holdings | Niagara Mohawk vs. Grocery Outlet Holding |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |